Time for Vanguard?

[shafer9]

Need some advice from this astute group. I’m 76 years old n I have been retired for about 10 years. My wife has several real estate investments and some money of her own. I have about 1.1M in an account with a “wealth management“ firm I’ve been with for 15 years. Also 215K in an IRA that is primarily in stock funds. (Condo is worth 450k and paid for.)
I have never had a problem with the managers other than paying 2% a year. Lol. The money is basically in a couple of stocks and mostly funds. 40% equities, which is likely too much at my age. This “bubble” ain’t gonna last forever.
After reading posts on this forum for a year, I feel it may be time to move on and perhaps put the money into a couple of Vanguard accounts. My question is, is that a good idea, and what accounts should I explore, since I’m a very basic investor and not a financial whiz kid. We’ll, Not a kid, either. thanks.

 

[RetMD21]

Vanguard will manage it for 0.3%. I think you could do worse than just using their advisor service.

 

[sheldon cornped]

If you feel right about it, try Fidelity. Even though unadvertised, they might give you a bonus for transferring. I recently transferred an amount that qualified for a $3500 bonus as an existing customer. It never hurts to ask. Not sure Vanguard offers same or it may not matter to you. Also, in 2016 I rolled over my 401k and received a $1500 bonus. I have been very satisfied thus far with them.

 

[StillFiguringItOut]

Vanguard will manage it for 0.3%. I think you could do worse than just using their advisor service.

I’ve had a very stressful year, unable to pay attention to our investments for about half the year, and then being the executor to my mother’s estate. The Vanguard advisor service has been worth every penny of their fee for both my accounts and my mother’s. Easy to understand and not that hard on the wallet, certainly better than 2%

 

[MRG]

Vanguard will manage it for 0.3%. I think you could do worse than just using their advisor service.

+1
I use Vanguard PAS for about 40% of our investments. Great service and easy to understand.

It's part of my plan in case I predecease DW. She not interested in investing and Fidelity has shown their ability to sell really bad products to me. While they feel comfortable self managing our assets at Fidelity they can sell high priced services to people.

 

[travelover]

Gee, on 1.1 million, you are only paying $20,000 a year. They probably put in a good two hours a year to manage that.

 

[kgtest]

Need some advice from this astute group. I’m 76 years old n I have been retired for about 10 years. My wife has several real estate investments and some money of her own. I have about 1.1M in an account with a “wealth management“ firm I’ve been with for 15 years. Also 215K in an IRA that is primarily in stock funds. (Condo is worth 450k and paid for.)
I have never had a problem with the managers other than paying 2% a year. Lol. The money is basically in a couple of stocks and mostly funds. 40% equities, which is likely too much at my age. This “bubble” ain’t gonna last forever.
After reading posts on this forum for a year, I feel it may be time to move on and perhaps put the money into a couple of Vanguard accounts. My question is, is that a good idea, and what accounts should I explore, since I’m a very basic investor and not a financial whiz kid. We’ll, Not a kid, either. �� thanks.

This is my opinion, and it's a strong one worth what you are paying for it...so know that is my tone. I believe Vanguard is the best in the business. My investment expenses with them is .06%, but yours could be half mine.

I would recommend you put all your money into Vanguard and just buy VTI and forget about it. It has an expense ratio of a low .03%, that's POINT ZERO THREE, not 3% which is 10x cheaper than what its costing you to manage today.

What this means on your 1.315MM you have now, next year, assuming the same ~20% gains we had this year would put you at a balance of $1,578,000 with an expense ratio (fee) of .03% INSTEAD of your CURRENT 3% for a total fee in 2022 of $4,734.00 , saving you at minimum $28,266.

I feel like you can stay at 100% equities with VTI fund, knowing your wife has Real Estate to offset the risks of a down market.

Just let it ride, do an in-kind transfer (NOT A ROLLOVER) from your wealth advisor, and the IRA to Vanguard. THEN, sell the funds and buy back into VTI and let it roll. *NOTE that if any assets do NOT qualify for an in-kind transfer you would be doing a rollover and be hit with LTCG and STCG owing tax on the gains only at 15% rate.


IF equities are down, your risk is reduced with owning the properties. YMMV - Your mileage may vary. If you have ANY questions, Direct Message me and I'm happy to chat over the phone. I currently manage well over 4million in portfolios and help manage 6 investment properties worth over 2Million. That is not be bragging, rather attempting to build your trust.

As for the fee savings, spend some of it creating a Revocable Trust and a Will, re-title your spouse's real estate into the newly formed Mr and Mrs Shafer Trust, and declare in the will how you would want your assets handled upon death.

 

[travelover]

...........I would recommend you put all your money into Vanguard and just buy VTI and forget about it.........

But it appears that the $1.1 M is all after-tax money. If it is sold and reinvested in VTI it generates a big capital gains bill. I agree with transferring in kind, initially.

 

[OverThinkMuch]

I have about 1.1M in an account with a “wealth management“ firm I’ve been with for 15 years. Also 215K in an IRA that is primarily in stock funds. (Condo is worth 450k and paid for.)
I have never had a problem with the managers other than paying 2% a year.

Your adviser charges too much, but it's sadly common. I would suggest transferring "in kind" or as is - don't sell anything yet. Take a look at the mutual funds in your account - are they mostly from Fidelity or Schwab? If there's some overlap, I'd transfer to the matching brokerage.

If they don't match, I'd recommend Vanguard. Every company hides the fee for "other mutual funds", but I found it for each one:
Vanguard: $20/trade
Fidelity: $50/trade
Schwab: $75/trade

https://investor.vanguard.com/investing/transaction-fees-commissions/mutual-funds
https://www.fidelity.com/trading/commissions-margin-rates
https://www.schwab.com/pricing

The other advantage at Vanguard is that it's much harder to go wrong. Nearly all of their ETFs and mutual funds have low costs, which is not true of other brokers. So you contact Vanguard and arrange to have your account transferred... and suddenly you're making 2% more a year for yourself!

You will need to wait for "cost basis" information to arrive (~2 weeks?), and can then analyze which funds to sell first. I'd sell the funds with the highest expense ratios and lowest profits (or losses!). You might want to ask about that in a separate post, after you've transferred your funds somewhere with lower fees. Good luck!

 

[mrfeh]

Either do it yourself (read the bogleheads investing startup kit), or have Fidelity/Vanguard manage it for you for something around .3%.

Your wealth management company is stealing from you.

 

[Exchme]

But it appears that the $1.1 M is all after-tax money. If it is sold and reinvested in VTI it generates a big capital gains bill. I agree with transferring in kind, initially.

Yes, going to a low cost broker should be the goal, OP is buying the advisor a new car each year right now! At age 76, either a low cost advisor would be good or a one-fund solution like a Vanguard LifeStrategy fund. OP should be able to transfer individual stocks without needing to liquidate, so transferring that part is easy to transfer in-kind.

Some funds may have be liquidated and OP needs to get a report on the unrealized capital gains on those. There may not be a lot of unrealized gains - sometimes advisors' funds throw off big annual CGDs. If that's the case, it's even more important to get away from the advisor. Unrealized gains get a step-up basis when inherited by a non-spouse, so OP should not pay taxes along the way.

 

[finnski1]

This is my opinion, and it's a strong one worth what you are paying for it...so know that is my tone. I believe Vanguard is the best in the business. My investment expenses with them is .06%, but yours could be half mine.

I would recommend you put all your money into Vanguard and just buy VTI and forget about it. It has an expense ratio of a low .03%, that's POINT ZERO THREE, not 3% which is 10x cheaper than what its costing you to manage today.

What this means on your 1.315MM you have now, next year, assuming the same ~20% gains we had this year would put you at a balance of $1,578,000 with an expense ratio (fee) of .03% INSTEAD of your CURRENT 3% for a total fee in 2022 of $4,734.00 , saving you at minimum $28,266.

I feel like you can stay at 100% equities with VTI fund, knowing your wife has Real Estate to offset the risks of a down market.

Just let it ride, do an in-kind transfer (NOT A ROLLOVER) from your wealth advisor, and the IRA to Vanguard. THEN, sell the funds and buy back into VTI and let it roll. *NOTE that if any assets do NOT qualify for an in-kind transfer you would be doing a rollover and be hit with LTCG and STCG owing tax on the gains only at 15% rate.


IF equities are down, your risk is reduced with owning the properties. YMMV - Your mileage may vary. If you have ANY questions, Direct Message me and I'm happy to chat over the phone. I currently manage well over 4million in portfolios and help manage 6 investment properties worth over 2Million. That is not be bragging, rather attempting to build your trust.

As for the fee savings, spend some of it creating a Revocable Trust and a Will, re-title your spouse's real estate into the newly formed Mr and Mrs Shafer Trust, and declare in the will how you would want your assets handled upon death.

Great post and if the OP isn't comfortable with 100% VTI there are several other options. I hope he contacts you. I hate when people pay 10's of thousands of dollars in annual fees unnecessarily for, as Travelover says, "2 hours of work per year".

 

[OldShooter]

2% ?!!? It was time for Vanguard 15 years ago!

 

[finnski1]

2% ?!!? It was time for Vanguard 15 years ago!

Exaccary!

 

[Closet_Gamer]

Getting away from a 2% fee advisor is a no-brainier. Do it tax efficiently as others have suggested.

Given your age, I think it is definitely important to know how it would be managed if you were suddenly unable to keep an eye on it. A low fee advisor at one of the big three could certainly do that for you.

 

[RetiredHappy]

Your adviser charges too much, but it's sadly common. I would suggest transferring "in kind" or as is - don't sell anything yet. Take a look at the mutual funds in your account - are they mostly from Fidelity or Schwab? If there's some overlap, I'd transfer to the matching brokerage.

If they don't match, I'd recommend Vanguard. Every company hides the fee for "other mutual funds", but I found it for each one:
Vanguard: $20/trade
Fidelity: $50/trade
Schwab: $75/trade

https://investor.vanguard.com/investing/transaction-fees-commissions/mutual-funds
https://www.fidelity.com/trading/commissions-margin-rates
https://www.schwab.com/pricing

The other advantage at Vanguard is that it's much harder to go wrong. Nearly all of their ETFs and mutual funds have low costs, which is not true of other brokers. So you contact Vanguard and arrange to have your account transferred... and suddenly you're making 2% more a year for yourself!

You will need to wait for "cost basis" information to arrive (~2 weeks?), and can then analyze which funds to sell first. I'd sell the funds with the highest expense ratios and lowest profits (or losses!). You might want to ask about that in a separate post, after you've transferred your funds somewhere with lower fees. Good luck!

There are no trade fees for Fidelity, and we have only transacted stocks and etfs.

 

[RetMD21]

I like Vanguard and the fees don't amount to much even if they charge you $20 here and there. Many folks who have been using an advisor will want one at least at first. There are price breaks for bringing in large amounts of assets so OP might not have fees. When I helped my mother transfer assets to Vanguard I kept her load funds because of embedded capital gains. It was no problem. I sold them after she passed away. Transferring assets in kind rather than selling and transferring cash is important in the taxable accounts as folks have pointed out. I have had accounts at Fidelity, Schwab etc. but I think Vanguard is fine. Although I haven't used the advisors it seems like they could help.

 

[SecretlyFI]

I would recommend you put all your money into Vanguard and just buy VTI and forget about it. It has an expense ratio of a low .03%, that's POINT ZERO THREE, not 3% which is 10x cheaper than what its costing you to manage today.

What this means on your 1.315MM you have now, next year, assuming the same ~20% gains we had this year would put you at a balance of $1,578,000 with an expense ratio (fee) of .03% INSTEAD of your CURRENT 3% for a total fee in 2022 of $4,734.00 , saving you at minimum $28,266.

[snip]

Just let it ride, do an in-kind transfer (NOT A ROLLOVER) from your wealth advisor, and the IRA to Vanguard. THEN, sell the funds and buy back into VTI and let it roll. *NOTE that if any assets do NOT qualify for an in-kind transfer you would be doing a rollover and be hit with LTCG and STCG owing tax on the gains only at 15% rate.

I'm not following this math. I think the savings in fees would be even greater than 10x. .03% expense ratio is .0003. I think the OP said he's currently paying 2%, not 3%. 2% is 67x what he is paying now. So I think the fee comparison would be $473 vs $31560.

Also, I thought a "rollover" was when you move say, a 401k to an IRA. I agree with the in-kind transfer. But when he then sells the funds to buy into VTI, he would incur LTCG & STCG based on the cost basis that transfers to the VG account - for the 1.1 million, at least, not the IRA which he can sell & buy within, without CG's.

 

[OverThinkMuch]

There are no trade fees for Fidelity, and we have only transacted stocks and etfs.

Stocks and ETFs are free at Fidelity, Schwab and Vanguard. But "other mutual funds" which I focused on in that post, cost much more:

Every company hides the fee for "other mutual funds", but I found it for each one:

Unfortunately, many financial advisors get paid by mutual funds. I call it a kickback and think it should be illegal. But OP most likely wound up with a financial advisor that is lining their own pockets. So they will very likely have some mutual funds from other providers - and not as many stocks and ETFs that pay the firm nothing.
https://www.investopedia.com/ask/answers/091815/do-financial-advisors-get-paid-mutual-funds.asp

 

[kgtest]

I'm not following this math. I think the savings in fees would be even greater than 10x. .03% expense ratio is .0003. I think the OP said he's currently paying 2%, not 3%. 2% is 67x what he is paying now. So I think the fee comparison would be $473 vs $31560.

Also, I thought a "rollover" was when you move say, a 401k to an IRA. I agree with the in-kind transfer. But when he then sells the funds to buy into VTI, he would incur LTCG & STCG based on the cost basis that transfers to the VG account - for the 1.1 million, at least, not the IRA which he can sell & buy within, without CG's.

Aha, you are correct at 2% your math is accurate. I did make note if there is no option for an in-kind transfer, and only the OP would know, then he would face STCG and LTCG on his earnings. I see the breakeven point being almost immediate as he will save so much in investing expenses.

 

[Scuba]

We have been very happy with Fidelity. We manage a small Vanguard account for a relative so we have direct experience with both Vanguard and Fidelity. You can still buy Vanguard funds or ETF’s through Fidelity, and Fidelity’s website and customer service are far superior to Vanguard’s in my opinion.

I’ve heard good things about Schwab too but haven’t had an account there. We used to have a TD Ameritrade account but prefer Fidelity to them.

The most important thing is to move your assets to any one of the brokerages recommended and stop paying 2% ASAP!

 

[stephenson]

I would need more info you opine much more than to say, "Stop giving someone 2%!"

My broad advice would be to use Fidelity (I have Vanguard accounts, as well) as the go to ... decide how much you need for two years of expenses, then allocate to 1-3 funds that provide suitable income, with equity positions per your asset allocation.

Use index ETFs or index bond fund and index equity funds.

2% is robbery!

 

[Sunset]

OP - Phone Vanguard, tell them the issue and they will help you transfer everything "IN KIND".

I did this for my DFIL , he was older and had lot less, and LOVED not paying the 2%.

I didn't sign him up for the Vanguard management, as I did it for him, but at .3% you would still save a LOT of money every year.

Heck, even if you just transferred everything and left it the same, you would save $22,000 per year for the same holdings.

Over a few years you could change holdings, carefully watching how much capital gains you trigger from the various sales. Which sounds complex, but just means pick one stock/holding you don't like and sell all/some of it and buy a Vanguard ETF.

 

[Midpack]

2% ?!!? It was time for Vanguard 15 years ago!

+2. I was horrified when I read 2%, that’s outrageous. I’d transfer all the assets in kind (to avoid gains/taxes) to Vanguard or Fidelity immediately, and I wouldn’t feel the current advisor deserves any explanation.